A shortage of properties coming onto the market means as many as five buyers
are chasing every home for sale, according to the latest figures.

Estate agents reported that five house hunters were registered with them for every property they had on their books last month.

But the high level of demand is failing to translate into increased sales, with estate agents selling an average of 7.7 properties each, down from 8.5 in September.

The number of buyers also dipped slightly to 287, down from 294 in September. But it remains a significant increase on the 196 house hunters for the same month last year, according to the National Association of Estate Agents.

The heightened demand is a result of fewer properties on the market, with estate agents reporting that the average number of properties available for sale per branch dropped from 62 in September to 57 in October.

The mis-match between supply and demand has helped to boost prices in recent months with the Halifax reporting values rose 1.2 per cent last month, boosting the average cost of a home to £165,500.

Gary Smith, president of the NAEA, said: “There is strong demand for property and more optimism in the housing market than we have seen for months. This is good news for the recovery of the market and for the British economy in general.

The figures also revealed first-time buyers accounted for 22 per cent of sales agreed during October, which is down from 26 per cent the previous month, but more than double the 10 per cent reported in October last year.

It comes as several lenders improved their mortgage offers in a further sign that competition is improving in the market.

Northern Rock has cut its mortgage rates for the fourth time in a month, reducing some deals by up to 0.5 per cent, while Britain's biggest building society Nationwide cut the cost of 19 of its mortgages.

And figures from personal finance website Moneyfacts suggests lenders are more willing to lend to those with a small deposit.

Since March, the number of mortgage deals requiring a minimum deposit of 15 per cent has risen from 169 to 231, while numbers requiring a minimum deposit of 10 per cent have risen from 89 to 105.

Melanie Bien, of mortgage brokers Savills Private Finance, said: “The dearth of flats and houses coming onto the market means that even those who can obtain the necessary finance may not find a suitable property to buy.

“Family homes are in particularly short supply and prices are being sustained because of the demand for each property that comes onto the market. Until more properties become available and finance is more readily accessible to those with small deposits, the number of transactions will remain woefully low.”